Question

Mandy prepared a trial balance from his ledger on 31 December 2016. The debit column total was $150 500 whereas the credit column total was $148 500. The difference was placed in a suspense account. He discovered the following errors in his books: 1. An invoice for $4000 sent to White, a credit customer had been completely omitted from the books. 2. A page from the Sales day book sub-totaling $15200 has been incorrectly carried forward as $12500 3. The purchase of office equipment for $5200 had been debited to office expenses account. Depreciation of 10% was not provided on this equipment 4. A purchase of office stationery, $410, had been debited to purchases account. 5. Bank charges of $180 appeared in the cash book but it was not posted elsewhere. 6. A balance of $560 on D. Jack's account had been written off correctly to the bad debts account but had not been entered in the personal account. 7. Commission paid $540 had been credited to Commission received account (a) Prepare journal entries to correct the above errors [14 marks] (b) Write up the suspense account 6 marks] (c) Show a statement of corrected net profit ( the net profit before the errors were discovered was $ 136 800) [5 marks]

Answer 1

(a)

Journal Entry
Date	Particular	Debit	Credit
1	Accounts Receivable-White	$        4,000
	Sales		$        4,000
2	Suspense	$        2,700
	Sales		$        2,700
3	Office Equipment	$        5,200
	Office Expense		$        5,200
	Depreciation Expense($5,200*10%)	$           520
	Office Equpment		$           520
4	Printing & Stationery Expenses	$           410
	Purchhase		$           410
5	Bank Charges	$           180
	Suspense		$           180
6	Suspense	$           560
	Accounts Receivable-D. Jack's		$           560
7	Commission Received	$           540
	Suspense		$           540
	Commission Paid	$           540
	Suspense		$           540

(b)

Suspense A/c
Particular's	Amount	Particular's	Amount
Sales	$             2,700	Balance b/d	$            2,000
Accounts Receivable	$                560	Bank charges	$               180
		Commission Received	$               540
		Commission Paid	$               540
		Closing Balance	$                 -
	$             3,260		$           3,260

(c)

Statement of Corrected Profit
Net Profit before the error were discovered	$ 1,36,800
Add: Sales Ommited	$      4,000
Add: Diffrence of Wrongly Carried forward Sales	$      2,700
Less: Office Expense wrongly debited instead of Office Equipment	-$     5,200
Less:Depreciation Not Provided Earlier	-$        520
Less: bank Charges not debited in profit and loss account earlier	-$        180
Less: Commission received wronly Credited	-$        540
Less: Commision Paid	-$        540
Net Profit After All Adjustment	$ 1,36,520